Elon Musk’s xAI secures $10 billion in debt and equity to expand AI infrastructure

Morgan Stanley (NYSE: MS) confirmed that xAI had completed a $5 billion debt raise through a mix of secured notes and term loans. The transaction, which was oversubscribed, attracted backing from major global debt investors, reflecting solid appetite for exposure to Musk’s AI ambitions despite mixed signals about overall demand for high-risk debt this year.

In addition to the debt, xAI has also finalized a separate $5 billion equity raise from strategic partners, further boosting its war chest to develop advanced AI solutions. The fresh capital will support infrastructure investments, including new data centers and the continued evolution of its flagship AI platform, Grok, which Musk has positioned as a rival to OpenAI’s ChatGPT.

Morgan Stanley’s statement noted that the firm sees significant investor confidence in xAI’s potential to carve out market share in the increasingly crowded AI sector. Competition has intensified in recent months as major players like OpenAI, Anthropic, and Google DeepMind ramp up funding and partnerships to scale their language models and computing resources. Bloomberg previously reported that xAI has also been in discussions to secure an additional $20 billion in equity capital, which could push its valuation above $120 billion. Some investors have speculated the company’s worth could reach as high as $200 billion, depending on how rapidly it scales its infrastructure and user base.

While xAI did not immediately comment on the fundraising, the combined $10 billion capital injection makes it one of the largest single rounds in the AI infrastructure space this year. The global market for generative AI is projected to grow from $44 billion in 2023 to more than $207 billion by 2030, according to Bloomberg Intelligence (2024), intensifying the race to secure computing power and specialized data assets.

For Morgan Stanley, the transaction further cements its role as a key banker to Musk’s expanding business empire, which spans electric vehicles, space, social media, and now generative AI. Analysts say the ability to close such a large, oversubscribed debt package signals that investors remain willing to back Musk’s high-risk, capital-intensive ventures despite broader caution in credit markets this year.

With competition accelerating and data center costs soaring, the new funding is expected to help xAI keep pace with rivals by expanding its computing footprint and talent base while bringing its Grok platform to a wider audience.